Is UK Property Still A Good Investment?

Is UK Property Still A Good Investment_

Property prices in the UK have been relatively stable, showing growth in prices in many areas. While some locations fell just a few percent, there is expected to be a rise in house prices in the UK after Brexit as more investment opportunities throughout the country arise.

Areas that are along the new high-speed rail service to London are sure to see a rise in value as commuters to the city will be well placed to travel. Property is less volatile than the rest of the UK and also less volatile than the stock market – It’s excellent for those looking for a longer-term investment opportunity.

Property in London can produce a better income yield and higher capital growth than other parts of the UK. Even if the housing market were to crash, London would bounce back relatively quickly and start to gain value again in no time. This means investing in London is more stable and rarely sees any decline in property value from which it can not recover.

London property prices

Where Are London Property Prices Heading Right Now?

Across the UK, investment in property is seen by the majority of people as the chosen path to capital. Many people measure their wealth by how much value their house has earned. This is the most significant investment most people make and gives investors many benefits.

Here are some reasons as to why property investment is leading all other investments nationwide in the UK:

  1. You can monitor your investment while others are doing all of the work
  2. Rental revenue is higher than dividends from stocks
  3. The history of capital gains is higher in the long term than stocks
  4. It’s a tangible possession – an estate to leave when you die
  5. By requesting deductibles, the Government offers ways to reduce the income tax bill
  6. Make the most of your return on investment in property – you need money from other people to make money
  7. With proper investment education, it is easy to understand property investment in the UK

However, even with this specific collection of advantages of investing in property, you’ll want to know if purchasing a property is still the best investment in today’s political and economic climate. The answer is yes, but it has to be done thoughtfully.

London Property Prices – Perception vs Reality

Recent national and local press reports – particularly after Brexit – have led us to believe that prices for property in London are dropping. That is not the case at all. In fact, according to actual sales prices as reported on the UK Land Registry, there has been only one month in the last year in which the average house prices in London have dropped.

how are London property prices holding up in the current climate_

How Are London House Prices Really Holding Up?

In the last year or so, the London property sector has faced a range of headwinds. We have seen improvements in the manner in which mortgage interest tax relief is assessed on property investment; UK stamp duties have been raised on second-home sales, with a 3% surcharge; and, of course, we have had the Brexit referendum.

Looking at the London property market, we can see that this year’s prices rose sharply in March, and then dropped down in April. That can be explained easily, particularly when we look at transaction numbers.

The extra stamp duty was revealed in the Autumn Budget last year. Everybody knew April this year was coming. Accordingly, buyers hurried to get deals completed in March before the stamp duty rise impacted them. A record number of house transactions concluded in the month (16,322) were reported. As the market grew, sellers forced up rates.

It is not shocking that transactions crashed in April, and prices fell too. It could be argued that the 0.31% decrease was an extremely robust result.

Switch to May through July, and you can see a dramatic increase in London property prices, but the monthly increase is on a downward trend over the three months up to July. Nevertheless, the 12-month rise of 12.3% is a quicker rate of growth than in the last quarter of 2015. This is also a higher price rise than the average annual rise between 1973 and 2015, estimated at 8.8% in the Nationwide House Price Index

What Now For London House Prices?

While looking at the potential for investing in London properties, we would predict a time of coolness as price increases return to their long-term average. Yet we are not expecting a price crash.

One reason for this is that London property has become inexpensive in foreign currency terms due to the collapse in the value of the pound on foreign exchange markets. We’ve seen a distinct pick-up in interest from international investors here at YPC Group, delighted to be buying at an even better value today than they were at the beginning of June. It will help to mitigate any price harm from post-Brexit domestic jitters.

The Fundamentals Are Extremely Strong For London Property

There are a number of explanations as to why property prices in London continue to rise. Although short-term sentiment may cause sellers to lower price expectations and buyers to overpay, the fundamental values of the property market are dictated by the long-term values of the properties and the long-term trends underpinning the market – which have never been greater.

Projects such as Crossrail and High-Speed Rail are expected to U-turn travel, industry and regional economies. Developers are working to redevelop London, removing the old stretches of the city and modernising it.

Despite concerns of a Brexit failure and withdrawal by significant banks from around the world, the number of financial jobs reported in the city has risen since the Brexit vote. Housing demand is expected to increase, along with the population.

The Greater London Authority conducts routine population analysis, particularly on this last point. Today the population of London is around 8.75 million and is estimated to rise to 10.8 million by 2041, despite the concerns about Visas and travel restrictions surrounding the Covid19 pandemic. These new residents will need accommodation and as housing demand in London is now outstripping supply but is expected to increase much more rapidly over the next two decades – it seems like the perfect time to take advantage of the market.

Property investment: Basic Demand vs Organic Demand In London

In a simplified real estate market, a basic supply vs demand situation determines property prices. We have already seen that over the next quarter of a century, the market is expected to rise dramatically in London.

The competition in London is more complicated. There’s a broad base of investors, and sometimes the dynamics that drive demand from investors are different from the dynamics that drive organic demand for housing. Investors are concerned with rental and capital development. Their capacity and ability to invest is also dictated by funding costs and the provision of suitable assets.

I’ve been around long enough to know property prices are not just going up. However, I’ve been around long enough to know that the next few months could deliver the kind of market that allows experienced property investors to buy quality real estate and excellent value prices. If consumer sentiment falters, then we may see existing investors and homeowners chasing income. That could provide the potential for long-term investors to negotiate very favourable terms to avoid those who are unable to pay their mortgages from having their homes repossessed.

With the Covid19 pandemic, there will be people who fall on harder times after losing their jobs and businesses; this will open up the market to new investment, maybe even with some money knocked off. When the markets and city get back to normal, those prices will surely return, giving you an excellent opportunity to make a higher and faster return on your investment.

Time things right and investing in a property in London could pay your pension when you retire or be a great asset to leave your family when you’re gone.  

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